Semiconductor consolidation is the recent trend of semiconductor companies collaborating in order to come to a practical synergy with the goal of being able to operate in a business model that can sustain profitability.
Since the rapid adoption of the modern day chip in the 1960s most companies involved in producing semiconductors were extremely vertically integrated, with all aspects of business tightly controlled. Semiconductor companies owned and operated their own fabrication plants and also the processing technologies that facilitated in creating the chips. Research, design, testing, production, and manufacturing were all kept "in house". Advances in the semiconductor industry made the market extremely competitive, companies began to use a technology roadmap that helped pave goals for the industry to set its eyes on, this roadmap became to be known as Moore's Law, a statistical trend seen by Intel's co founder Gordon Moore in which the number of transistors on an integrated circuit is doubled approximately every 2 years. This increase in transistor numbers meant that chips were getting smaller and quicker as time progressed.
As chips continued to get faster so did the levels of sophistication within the circuitry. Companies were constantly updating machinery to be able to keep up with production demands and overhaul of newer circuits. In order to produce faster chips, companies raced to make transistors smaller in order to pack more of them on the same size silicon, this practice became known as "shrinkage".
Companies were now in a race against each other and themselves to create the next fastest chip as all goals were to meet or exceed Moore's Law. With the shrinking of sizes in semiconductors, production became much more intricate. Fabrication machines which were producing chips at the millimeter level in the 60's were now operating in the micrometer and heading into the nanometer scale. As of 2011[update] most cutting edge processor makers are working in the 32 nm level and heading into full 22 nm production; sizes comparable to the human DNA strand.  The process at which most of these intricate chips are being produced at is called photolithography, and the cost of equipment and operating them has grown astronomically resulting in an inevitable consolidation of semiconductor companies.
Companies like Xilinx and Western Design Center were pioneers and the first to realize the practicality of not having to sustain a fabrication plant model. As costs continued to grow and competition grew fierce, resources could not be focused on maintaining a business model that had to sustain research and production. The solution became the Fabless semiconductor company model, where a company could focus all its resources to the design, marketing, and sale of its devices while outsourcing the production of its devices to manufacturers called fabs.
This business model grew in such popularity that the new initiative was being promoted by a group called the Fabless Semiconductor Association (FSA) which is now the Global Semiconductor Alliance.
These fabs were able to update assembly and photolithography systems much easier than their counterparts as all they focused on is handling bulk orders that come from these fabless businesses commonly referred to as foundries. As well, the bottom line of these two business models became much stronger.
Although many companies grew and profited well from a fabless business model, new hurdles still had to be dealt with. The modern day microprocessor now has billions of dollars of research put behind it, with months and even years of research in creating the micro circuitry, teams of hundreds of engineers testing, and developing a chip. It has now gotten to the point that even keeping fabrication and development apart is not enough.
"On one side will be Intel and a select few that can afford their own fab plants—which will cost between $2.5 billion and $3 billion to build in 2003 and $6 billion by 2007—and perform basic research on transistor design or new chip materials. These new fabs will process wafers with 300-millimeter diameters, larger and more complex to make than today's 200-millimeter variety. On the other side will be everyone else. They will have to share fabs, pool research, buy technology or rely more heavily on outside foundries, which in turn will have to seek help"  The theory, Rock's Law, was first seen by venture capitalist, Arthur Rock in which he proposes that the cost of a fabrication plant doubles every 4 years and eventually gets to the point in which it will collide with Moore's law. The idea being if these plants effectively become too expensive to build, then Moore's law cannot be met. The next logical solution was to collaborate between companies and consolidate efforts. Companies began to share ideas and have mutual interests. In turn this also meant many compatible companies ended up being takeover targets in order to strengthen relationships and help the businesses bottom line.
AMD spins off its fabrication business model into another entity and calls it Global Foundries. It as well has large interests in Canadian GPU manufacturer ATI and buys out the company for a direct acquisition.
TI and Infineon have said they will outsource some production to Shanghai's Semiconductor Manufacturing International Corporation.
Although the trend seen by analyst is that there will be an industry wide move towards collaboration. Companies such as Intel, IBM, and Toshiba will be able to survive on their own as they are currently market leaders in the microprocessors, servers, and memory field ( within that order). These companies have such market dominance that they are able to afford fabrication costs and expenses, but for how long is left to speculation.
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